Gareth Morgan KiwiSaver Submission on MED Discussion Paper

Gareth Morgan KiwiSaver Ltd has recommended that KiwiSaver providers be required to report the performance of their funds using the Global Investment Performance Standards (GIPS). This is among a number of recommendations from Gareth Morgan KiwiSaver Ltd (GMK) to the Ministry of Economic Development (MED) in response to the Ministry’s discussion paper - Periodic Reporting Regulations for Retail KiwiSaver Schemes.

Andrew Gawith, a director of GMK, said that “the lack of any standard for reporting investment performance is little short of scandalous. Even China insists that foreign fund managers operating in their country report GIPS compliant investment returns”.

GMK strongly supports the implementation of regulations that require relevant, comparable, and reliable reporting standards for KiwiSaver schemes as soon as possible. The fundamental objectives for reporting performance are: that the data can be trusted, can be compared, is independently verified, and follows a detailed methodology that covers every aspect of calculating investment performance.

GIPS is the obvious standard – it is the most widely used and comprehensive performance reporting standard in the global funds management industry.

“In addition to using GIPS providers should be required to report performance data after all fees, expenses and taxes; that is, in-your-hand returns”, said Gawith. “It is important in building confidence in financial markets that performance data accurately reflects what the member would get if they were able to cash up their account.”

“In launching the KiwiSaver regime the government of the day missed an excellent opportunity to impose some clear rules for reporting investment performance and fees.”

MED is now working hard to bring greater discipline to how providers report performance and disclose and quantify fees so that they will be easier for people to understand and more importantly can be readily and reliably compared across providers. GMK urges the Ministry to be clear about what it is trying to achieve with fees. If the primary objective is to make it easy for consumers to compare fees across providers then the focus should be on the fees that providers (and their related parties) charge and receive for the services they deliver to their members. GMK’s submission suggests that a distinction be made between headline fees (those paid to providers for the services they provide) and indirect fees and expenses such as brokerage and sub-manager fees that are normally deducted at source. Gawith argues that “providers should be required to disclose and fully quantify headline fees.”

Submissions to the MED are due by the March 11th and will all be published on their website www.MED.govt.nz GMK’s full submission is available on their website www.garethmorgan.com

© Scoop Media